Is blender the right tool for my simulated 3D environment?
Blender is capable of doing what you describe. 

One major hurdle with this system is going to be the viewing client. If you need to output a stream over the network, your simulation will need to render to python socket. Probably most easily done in BGE. possible.  Then you'll also need an adaptor to make that a usable video stream. (If you were trying to open it in VLC or iTunes type app)

Another option might be to build your clients with BGE also, then you could use a Multiplayer framework to let people login to the running simulation.